The data from Goldman Sachs shows hedge fund leverage reached its highest point since 2018 because traders invested in bank and energy stocks before the U.S. military strike on Iranian nuclear sites.
The Federal Reserve’s steady interest rates led to a 22% increase in gross leverage which reached 294% from its initial 2024 level of 272% through financial firm and commodity-linked stock investments. North American and European financial stocks received long positions from hedge funds which maintained their short positions in Asian financial stocks.
The U.S. military operation which followed the Federal Reserve’s decision to keep interest rates steady caused oil prices to rise because of supply disruption concerns around the Strait of Hormuz.
The prime brokerage at Goldman Sachs observed that funds kept a net long position in energy equities while simultaneously increasing their bearish bets on Europe and Asia. Financial institutions became one of the most sought-after sectors because of rising interest rates and stable lending margins.
The bank reported that global equity hedge funds achieved more than 4% returns this year while European-focused strategies exceeded 10% and systematic funds reached nearly 12% returns.
